Congressman Jim Saxton (R-3rd/NJ) has carefully reviewed the
following
report on PA fiscal corruption involving the misuse of American
funding.
"The report objectively demonstrates the need for additional watchdog
measures
by the United States in dealing with the reality of Palestinian
financial
malfeasance in misusing funds from donor countries," Saxton
commented.

Congressman Saxton recommends it as necessary reading in
order to
fully comprehend the depth of Palestinian violations of fiscal
obligations
detailed in the Middle East Peace Facilitation Act (MEPFA).

Corruption within the
Palestinian Authority

by Murray Kahl*
October 30, 1997

Abstract

The following report details the embezzlement of US taxpayer
funding
by Yasir Arafat and other members of the Palestinian National
Authority.
The enclosed reports indicate that the controls established by the
World
Bank were circumvented by the PA to enrich the coffers of the
embezzlers.
This thievery was brought to the attention of the US Administration in
the summer of 1995 and ignored, with no controls established for
auditing.

Additional information is provided showing how an American
agency USAID
is funding the PA in disseminating virulent anti-Semitic and inciteful
propaganda. USAID denied any funding to the VOP (Voice of Palestine)
while
information from Gaza indicates the VOP received funding through USAID
and secondary sources.

Portions of two GAO (US General Accounting Office) reports
state that
Arafat refused to cooperate in accounting for monies received at least
two times. Other portions of the GAO report show that USAID and other
groups
promised additional information approximately 1 ½ years ago, yet
no information is available. Indeed, after a request by Rep. Gilman and
Sen. Helms, portions of the study, based on letters they received,
indicating
corruption were turned over to the CIA who classified the study and
removed
its availability from public scrutiny.

The US administration ignored evidence of corruption and in a
display
of hubris said: State Department, MR. BURNS (March 3, 1997): “Well,
our view is that the Palestinians are meeting their commitments to the
Israelis and to us that they have made consistently for the last four
years.”

At a hearing of the Senate Foreign Relations Committee
September 18,
1997 to consider the nomination of Martin S. Indyk for Assistant
Secretary
of State for near Eastern Affairs, the following exchange took place:

SEN. GRAMS: Just a couple other quick question. The Holtz (sp)
fund,
as you know, was established in 1993, $2.4 billion, which would go to
the
Palestinian Authority. But reports in May of this year, reports that --
by a PA Monitoring Institute, that stated as much as $326 million of
about
$866 million in the budget so far for 1997 has been misused or wasted.
Is the Palestinian Authority Monitoring Institute report on corruption
and misuse of funds -- is that accurate?

MR. INDYK: I gather that there was some questions about its
accuracy,
but the overall thrust of its conclusions, we feel, are accurate and
they
cause considerable concern. They have been a cause of concern for the

Palestinian Legislative Council. And Chairman Arafat himself
has set
up another committee to investigate these corrupt practices.

I would just point out that none of the money that the
Congress had
voted for aid to the Palestinians goes to the Palestinian Authority. It
goes to fund projects that are administered by USAID, which lets out
contracts
but supervises all of the expenditures of those monies for those direct
projects. And we have full accounting transparency and accountability
for
the funds that we provide as aid to the Palestinians.

SEN. GRAMS: So you feel the U.S. is assured that the funds
provided
by American taxpayers for the Palestinians are being used legally and
efficiently
and wisely.

MR. INDYK: That's correct. As ambassador to Israel it was my
responsibility
to oversee the aid program to the Palestinians. And so I had direct
responsibility
for that, and I believe that this statement is accurate.

SEN. GRAMS: What auditing and monitoring procedures are in
place that
are going to assure this?

MR. INDYK: USAID has a whole series of regulations designed to
ensure
transparency of contracting procedures and expenditures of money and
reporting
procedures. That is all under U.S. government regulations. All

of the money is accounted for in that way.

That the US administration thwarted the wishes of the US
public is made
clear by a poll run by Luntz Research Companies, May 2, 1995. The poll
showed:

78%:12% agree that the PLO should be held ACCOUNTABLE to its
COMMITMENTS
as a PRECONDITION for receiving US financial assistance.

78%:11% believe that US funds should be suspended until the PLO removes
terrorist groups, such as Hamas, operating from PLO-controlled
areas.

73%:15% maintain that in order to get US funds, the PLO must eliminate
the clauses calling for Israel's destruction from its Charter.

Additional information regarding Arafat’s corruption has been surfacing
(Sampling:Appendix D) for years and ignored. It is obvious that only a
full congressional investigation can sort out the information and
determine
culpability.

Vanishing US Funds& US Administration
Complicity

by Murray Kahl*

The dilemma constantly faced by advocates of the peace process
is whether
the process is transcendent over a corrupt PA dominated by an
authoritarian
and corrupt Yassir Arafat. Information has surfaced to indicate that it
is no longer a question of how corrupt Arafat and his PA are but rather
the extent of their misdeeds.

Corruption is rampant and perceived as a root cause of
Palestinian unrest.
This problem is serious enough to prompt pro-Palestinian groups to
uncharacteristically
criticize Arafat as shown in Appendix A. The major flow of funding for
the PA is described in the GAO report of 1995:

The World Bank established the Holst Fund as a central
repository for
donations to help the Palestinian Authority pay start-up expenses and
short-term
operating costs. The World Bank is responsible for overseeing the use
of
these funds on behalf of the contributing donors. In 1994, the Holst
Fund
disbursed approximately $51 million to the Palestinian Authority and
PECDAR.
This total includes a $10-million contribution from the United
States.

Task Force Investigation Provided Proof of Arafat
Embezzling US Funds

The US administration ignored an investigation by the House
Task Force
on Terrorism & Unconventional Warfare, chaired by Congressman Jim
Saxton
(R-3rd/NJ), containing PA secret documents on the illegal use of
funding
by the PA. This report proved and documented in the summer of 1995 that
Arafat was embezzling funds through PECDAR. Yet, no attempt was made to
stop funding him or even increase auditing and supervision of the
expenditure
of US taxpayers' money.

See Appendix B:

Recent Initiative by Congressman Saxton

Many think that after the recent Congressman Saxton initiative to halt
funding through MEPFA for three months to allow an opportunity to study
reported misuse of US funds, US aid to the PA was halted for three
months.
However, the flow of US funds continues unabated through other
government
agencies as discussed below.

The degree of corruption is yet unexplored and as reported 1
on July
29, 1997, “a Palestinian legislative panel investigating government
corruption
today urged Yasser Arafat to dismiss his Cabinet and recommended
charges
be filed against some ministers.”

The investigative committee was set up in response to a “state
comptroller's
report two months ago that found $326 million of the Palestinian
autonomy
government's $800 million annual budget had been squandered through
corruption
or mismanagement. Privately, sources indicate that though the PA report
indicates about 36% of the funds were misused, the true figure is up to
about 85 to 90 percent. Conspicuous in its absence in the report — as
in
the comptroller's audit — was an investigation of Arafat's office
itself.”
2. The report was damning; the Arab press . reported:

According to officials in Arafat's office, the next few days
should
see a major reshuffling in the PA's agencies. The shakeup will affect
the
Palestinian Council of Ministers and the security apparatus. The
enquiry
led by 'Abd-al-Rahim has completed its consideration and endorsed the
findings
of the GOA's report.

The misappropriated funds break down as follows: A total of
$167 million
as concessions offered by the Ministry of Housing to investors who
bought
state-owned land in line with a decision by the Palestinian Cabinet,
which
provided for a 40 percent discount on the land's value after it was
assessed
by a special committee; a total of $24 million in customs exemptions on
1,550 brand new vehicles bought by returnees; $80 million from tax
evasion
with dodgers pleading dire economic conditions brought about by the
closures
instituted by Binyamin Netanyahu's government; $24 million in medical
expenses
paid to cover the cost of treatment in Israeli hospitals; bills worth
$5
million for cellular phones used by Palestinian officials; and $7
million
paid for superfluous printed material.

The AP reported that, “The panel's six-week inquiry found
wide-ranging
abuses, including the diversion of contributions from international
donors,
and said much of the Palestinian autonomy government's $800 million
annual
budget had been mismanaged. It called on Arafat to “dissolve the entire
Cabinet.”

Arafat immediately issued one of his predictable statements
indicating
that he would take immediate action. According to Marwan Kanafani, a
spokesman
for Arafat, “the report was “a good thing”' and said the report
provides
“a strong basis” for a Cabinet reshuffle that Arafat was already
planning.”
Arafat was planning on action!

Arafat’s first non-action was announced by 'Azzam al-Ahmad,
minister
of public work in the Palestinian National Authority, in the Arab press
4. “Al-Ahmad disclosed that Palestinian President Yasir 'Arafat
rejected
the collective resignation tendered by the Palestinian Government
following
the Palestinian Legislative Council's recommendation to form a new
government.
The recommendation was made in light of the Public Control Commission's
report, which addressed corruption in the Authority's establishments.”

The degree of corruption was addressed by others in Arafat’s
cabinet
and Palestinian Legislative Council member Rawiyah al-Shawwa by Samir
al-Hijjawi
in Amman 5. who said:

No one can deny that some PA officials have committed some
abuses. These
abuses took different forms such as bribes, the abuse of power, the
misuse
of public funds, the monopolies, the widespread nepotism, and the
unequal
opportunities.

We raised these issues several times in the PC and signaled
the danger
caused by the spread of these problems in a society which is still in
the
first stages of building itself.

It is clear that Palestinian unrest and dissatisfaction with
the PA
led to street support of Palestinian groups such as HAMAS and Islamic
Jihad.
Yet, a clever Arafat successfully diverted attention from his
responsibility
in diverting funds from legitimate, infrastructure development, and
blamed
Israel at a national unity conference held by terror groups as reported
in the PA mouthpiece al Quds 6, “... and on the other hand on dealing
with
the Palestinian people in the spirit of peace and on the basis of
equality
and respect -- away from the policy of siege, starvation, and the
imposition
of collective punishment.”

The First Signs of Ignoring the Report:

Nonetheless, there was some hope that Arafat would take some action
against
the institutionalized corruption rampant in the PA, and that the
incident
reported above of Arafat rejecting the collective resignations was a
singular
aberration. Sadly, for American taxpayers, that was not to be, and the
first predictable signs of Arafat reneging and sidestepping this
massive
corruption issue was reported in the Arab press 7.on August 19:

The Jordanian authorities have received some Palestinian
information
indicating that Palestinian President Yasir 'Arafat intends to deal
with
the issue of corruption within the [Palestinian] National Authority
[PA]
quietly and without overreacting, particularly in view of the situation
in the Palestinian territories.

According to this information, provided by responsible
Jordanian sources,
'Arafat left it up to the Palestinian Legislative Council [PLC] to
decide,
without any interference on his part, and that is why, based on the
report
by the presidential investigation committee which, after completing its
work, put the report at the president's disposal, it decided to ask
'Arafat
to change the government ministers within two months or by September.

The sources told Al-Sharq al-Awsat that it was decided that
the government's
resignation and even the debate which took place during that session at
the end of last July should be kept secret, and that all that was
announced
was that President 'Arafat said that he could not accept their
resignation
under the present difficult circumstances that the PA is going through.

The sources said that the Jerusalem operation has put an
additional
burden on 'Arafat's plan for changes in the Palestinian institutions in
the light of the report on corruption, and that the end-of-September
deadline
which the PLC has set to that effect will be extended for more than two
months to enable 'Arafat to put his changes in place. That is why he
has
told all his ministers and senior officials to keep quiet during this
period
with regard to everything related to the changes and the corruption
issue.

Arafat Denies all Charges

An omen? Clearly no, as anyone who follows Arafat’s MO knows that when
it comes to taking positive action that does not enrich him in some
manner
“he can float like a butterfly and sting like a bee.” Arafat proved
that
he is, well, Arafat and in an interview recently in an Arab newspaper
8,
he said in response to a question regarding corruption charges:

We told Abu-'Ammar [Arafat]: "What about the charges of theft
and embezzlement
of PA funds leveled by the Palestinian Legislative Council against some
PA ministers?

Abu-'Ammar strongly denied these charges. He said: All that
happened
was that we were lax in collecting customs fees from returnees. All
countries
exempt returnees from these taxes, which amount to $336 million. We
were
also lax in collecting electricity, water, and telephone bills in the
refugee
camps, dating back to the days of the intifadah. I want to assure you
that
our accounts are checked carefully by the World Bank and the IMF. At
the
conference recently held in Washington and attended by all the donor
countries,
these two institutions testified that our financial transactions were
sound."

There it is, a complete dismissal of all charges concerning US
funds
vanishing (and other funding by donor countries). Much of the funding
to
the Palestinians is through the Holst Fund and on to (PECDAR) The
Palestinian
Economic Council for Development and Reconstruction.

PECDAR says that:

PECDAR was established after the signing the
Palestinian-Israeli Declaration
of Principles (DOP, OSLO I) an international donor conference was held
in Washington in October 1993 to mobilize international aid to assist
the
Palestinian people to develop their economy through financing
infrastructure,
health and education programs and promoting the private sector as a
contribution
to the peace process.

The Palestinian Council for Development and Reconstruction
(PECDAR)
was established in November 1993 to organize, administer and disburse
international
aid in an effective and efficient way. It was assigned by the Palestine
Liberation Organization (PLO) and the newly-formed Palestinian National
Authority (PNA) to prepare and monitor development projects financed by
foreign aid and to coordinate the activities of the donor countries in
the Palestinian Territories. PECDAR reports that “Acting on the
economic
guidelines of the PNA, PECDAR has evolved to become the development
think-tank
of Palestine and the implementing agency assigned by the PNA, the World
Bank and the donor states to propose, select and implement foreign
aid-funded
projects as well as to coordinate and facilitate the flow and
allocation
of the funds.

PECDAR’s main offices are in Jerusalem (Dahiat-al-Barid) and
in Gaza.
Its resources consist of the assistance provided from donor states as
well
as international and regional organizations; allocations to PECDAR in
the
general budget and loans approved by the PNAOrganization and
Administrative
Structure.

PECDAR is part of the PLO Executive Committee and the
Palestinian National
Authority (PNA) and reports to both of them. It is governed by a
14-member
board with President Yasser Arafat as its President.

PECDAR’s Department of Finance and Administration consists of
three
main directorates: Personnel, Budget and Accounting, Support Services.
Their reported responsibilities include:

× Responsibility for the administrative, financial and
personnel
affairs of PECDAR.

× Supervision of aid funds and their use according to
conditions
agreed upon with the World Bank and the major donors.

× Financial execution of projects contracts and payment
to contractors.

× Responsibility for the accounts and financial
resources generated
by agreements signed between the PNA and the World Bank and other donor
groupings (EU, Islamic Development Bank, Arab Fund for Economic
Development)

Impressive fiduciary responsibilities and understandably
accountable
for abuse of funds. However, while Congress halted funding to the PA
under
MEPFA an alternative source of US funding is a US agency called USAID
who
turns a blind eye to this thievery and corruption and continues to
supply
even more funding to the PA.

Who and what is USAID? USAID reports:

USAID, the United States Agency for International Development (USAID)
is
the independent government agency that provides economic development
and
humanitarian assistance to advance U.S. economic and political
interests
overseas. Established in 1961 by President John F. Kennedy, USAID has
achieved
a proud record of accomplishment.

In these times of tight federal budgets, many Americans have
asked,
why foreign aid? The answers are simple: the small portion of the
federal
budget that assists developing nations is directly in the best
interests
of the United States and has produced a striking record of
accomplishment.
Public opinion polls on foreign assistance reveal two important trends:
(1) Most Americans grossly overestimate the size of America's foreign
assistance
program; and (2) A strong majority of Americans believe modest
assistance
to the less fortunate reflects American values.

In short, America is doing well by doing good through USAID's
participatory
development activities.

Brave and honorable words, unfortunately it is questionable as
to whether
USAID lived up to its initial goals. USAID is a splendiferous creature,
birthed in the 60's whiplash morality as the lynchpin of US real
politick,
yet we find controversy as USAID subordinates American morality to a
political
response in international relations. For example, environmentalists
were
furious when they discovered that an African group, lobbying for the
resumption
of the ivory trade, received its funding from a community development
program
in Zimbabwe. This program also allows trophy hunting of big cats,
rhinos,
and elephants, and receives an average of 2 ½ million dollars of
American aid every year.

When Senator Barbara Boxer learned of this she said, “American
taxpayers
would be horrified if they knew that we are supporting the killing of
the
elephant.” And the Humane Society of the US said, “Using your tax
dollars
to promote elephant killing is an outrage!”

US tax dollars given by USAID is funneled through a group in
Zimbabwe
called CAMPFIRE who has received more than 20 million dollars since
1989.9
And this pattern of channeling funding through intermediaries is the
difficulty
we find in tracing the end recipient in the Middle East.

Fairness dictates that USAID be asked about reports such as
one indicating
that USAID has been financing the anti-Semitic and holocaust
revisionist
Voice of Palestine (VOP). A number of calls were placed to USAID
beginning
on August 29 of this year asking if USAID was used to assist the VOP.
Three
weeks and three phone calls later, a USAID representative responded by
saying that she had investigated, spoken to a number of people, and
said
that USAID has not financed the VOP and will not do so. Yet, we
read in a Philadelphia Enquirer of September 7 (Appendix C):

The Palestinian Broadcasting Corp. is a creature of the 1993
peace accords,
which afforded Palestinians the first trappings of self-rule. The
“Voice
of Palestine” radio broadcasts began in 1994, television the following
year.

The network was nurtured with about $500,000 in equipment and
training
from the U.S. Agency for International Development [USAID] and with
more
than $6 million in aid from the European Union, according to network
chairman
Raddwan Abu Ayyash. A spokesman for the United States Information
Service
in Jerusalem said he could find records for only $70,000 in U.S. aid
spent
on training and TV cameras, but he added that the United States
provided
other funding for the network.

Whether the US is doing well by supporting USAID funding the
PA is questionable
as long as the funding is misused and not given to those who were
destined
to be the recipients.

Sources point out that USAID is expected to respond to charges
of disinformation
by saying:

They misunderstood

They did not give the money directly to the VOP

The funding given was misused without their knowledge.

The funding was diverted from other funds

Any or all of the above (or any other creative excuse)

Unfortunately, for USAID, there are only three alternatives. They
misrepresented
the issues, they told the truth, or they are incompetent. If they
misrepresented,
their entire mandate is compromised; if they told the truth and no
funding
was given to the VOP, it is incumbent on them to clear their name and
demonstrate
to all-- that US taxpayer dollars are not misused, if they are
incompetent,
they must be held accountable. Complicating their dilemma, is that
USAID
(if funding the VOP) misinformed Congress in receiving their funding,
as
Congress would not have allowed US funding to be misused in such a way.

The funding is large and USAID reports for 1997:

WEST BANK AND GAZA

FY 1997 Economic Support Funds: $75,000,000

While activities financed under the U.S. Government pledge for
support
to the peace process were only initiated within the last 18 months,
tangible
benefits have already been achieved. Budgetary support through the
multi-donor
World Bank "Holst" Fund, with USAID providing nearly $40 million,
helped
finance salaries for 29,000 public sector employees (mostly teachers
and
health care workers) to facilitate the transition to autonomous
Palestinian
provision of governmental services in the West Bank and Gaza.
USAID-financed
interventions in voter education and election administration and
observation
were instrumental in the success of the electoral process. The USAID
program
described below is positioned to play an important role in supporting
Palestinians
at this historic juncture in their development.

Other Donors:

In recognition of the serious problems faced by the new
Palestinian
Authority and the historic opportunity presented by the peace process,
donors pledged $2.4 billion in assistance to Palestinians at the
October
1993 Conference to Support the Middle East Peace Process. As part of
this
pledge, the U.S. Government committed to provide $500 million over a
5-year
period. Of this total, USAID will administer $375 million; the
remainder
will be provided through the Overseas Private Investment Corporation
(OPIC).

USAID announced as one of its’ accomplishments:

In January 1996, Palestinians elected an Executive Authority
Head and
88 members of a self-governing Council (with both legislative and
executive
powers).

Municipal elections are scheduled for later in 1996. These
elections,
per se, can be considered an accomplishment of the peace process as
supported
by the USAID program.

At this point, Palestinians must focus on further transition
towards
self-rule, including the establishment of democratic checks and
balances,
and the development of accountable and transparent governance.

Whether USAID is accomplishing its goals is up to American
taxpayers.
The majority of Congress has voiced its views.

Another US government source investigating PA funding is the
Government
Accounting Office (GAO). The GAO reports were requested by Benjamin A.
Gilman, Chairman, Committee on International Relations House of
Representatives,
to investigate allegations of corruption and there are two reports
available
publically from the GAO. In the first in 1995, the GAO reported that
the
response from the CIA for the results of their investigation regarding
PA corruption were unavailable and that “none of the CIA material used
in our report could be declassified.”

In the GAO report of 11/28/95, GAO/NSIAD-96-23, the GAO
reported:

Media allegations of tangible assets proved difficult to
confirm or
refute. Since at least the mid-1980s, newspaper and magazine articles
have
identified general or specific assets alleged to be owned or controlled
by PLO or its economic arm--Samed.

For example, several media reports alleged that PLO owns or
controls
several national airlines around the world. We were unable to confirm
such
allegations. In general terms, we did establish that Samed operated a
number
of different businesses in the past, including agricultural
cooperatives,
a film studio, a children's clothing factory, and a shoe factory.
According
to a State Department cable, PLO owned a duty-free shop in Tanzania
that
subsequently closed down. The cable also notes that "the PLO has other
money-making ventures here. A popular Middle Eastern restaurant, the
Cedars
Club, is run by the PLO. Undoubtedly, there are other economic
enterprises
as well."

Salaries for the PA militia were seized by the PA and
recorded in
the GAO report:

One major PLO expense transferred to the Palestinian Authority
was the
salaries of former PLO militia members hired by the Palestinian
Authority
to join its police force. Other transferred expenses included social
welfare
expenses, martyr family payments, civil servant pensions, and
supplementary
civil servant salary costs.

It is clear that the GAO could not fully analyze PA
expenditures
as they reported:

These budgets have been rudimentary in nature and generally do
not include
detailed cost and revenue schedules, although early versions of the
budget
did include footnotes that stated certain PLO expenses were included in
the Palestinian Authority's budget. It is unclear whether other PLO
costs
(such as those costs associated with its office in Tunis and a number
of
overseas missions) are included in the budget since they are not
explicitly
identified. The World Bank and the International Monetary Fund are
working
with the Palestinian Authority to improve its accounting and budget
development
apparatus. A more formal budget is not expected until 1996.

Under the peace accord, PLO and Israel must approve all
proposed police
force hires to prevent the hiring of former known or suspected
terrorists.

In a stunning display of hubris, Arafat is quoted in the
GAO report
as refusing to cooperate:

Chairman Arafat has stated publicly that he would refuse to
accept donor
controls over funding and has launched several attempts to frustrate
these
controls. He initially attempted to appoint himself as PECDAR's
director
but was rebuffed by the donors who demanded that a more independent
director
be appointed. He established competing decision centers in the
Palestinian
Authority and Tunis in an attempt to diminish PECDAR's role as a
central
contact point for donor aid. He also worked directly with certain
donors
to establish marquee development projects, such as airports, without
the
involvement of PECDAR officials.

In appendix I of the GAO report the following statement
appears that
also points out the unwillingness of the PA to account for funding:

The starting point for our review was an attempt to obtain
financial
information directly from the Palestine Liberation Organization (PLO).
PLO told us to provide written questions on the information we required
and then declined to respond to them. PLO also chose not to respond to
our written request for meetings with PLO and Palestinian Authority
officials
in the self-rule territories.

That Arafat ignored all restrictions is clear as stated in the
GAO report:
“For example, in violation of its grant agreement with the World Bank,
the Palestinian Authority spent $2 million of Holst funds on martyr
payments.”

“Unusual” expenses are explained unsatisfactorily by the
GAO:

However, less attention has been paid to the Palestinian
Authority's
expenditures, and the donors have agreed to pay for certain costs, most
notably civil servant and police salaries, without an adequate analysis
of the support for such costs. For example, it is not clear why the
Palestinian
Authority needed to hire about 9,000 employees to replace the
approximate
1,600 Israeli employees who previously worked for the Israeli civil
administration.
Nor is it clear why the Palestinian police force has grown to an
18,000-member
force when the Gaza/Jericho Agreement between PLO and Israel stipulates
a 9,000-member force for the Gaza/Jericho enclave.

The second GAO report was issued in 1996: Benefit of the
Palestinian
Authority (Letter Report, 01/08/96, GAO/NSIAD-96-18)

The study was to investigate the following questions asked by
Jesse
A. Helms

Chairman, Committee on Foreign Relations United States Senate
and Benjamin
A. Gilman Chairman, Committee on International Relations House of
Representatives

A series of letters allegedly prepared by the Palestinian
Authority's
Finance Minister and the Director General of the Palestine Economic
Council
for Development and Reconstruction (PECDAR) indicates that $138 million
from unidentified sources was "diverted" in late 1994 to finance
several
covert transactions. These transactions include purchasing land and
building
apartments in Jerusalem, funding a Palestinian journal, and providing
financial
support to groups inside Israel that are sympathetic to the Palestinian
cause.

In response to Congressional concerns that U.S. assistance may
have
been involved in these transactions, this report discusses (1) the
financial
controls established by the World Bank and the U.S. Agency for
International
Development to monitor the use of U.S. funds provided to the
Palestinian
Authority, PECDAR, or the Palestine Liberation Organization officials
for
budget support purposes and (2) what controls the U.S. Agency for
International
Development established over project funds provided to other U.S.
government
agencies, private contractors, non-governmental organizations, private
voluntary organizations, and the United Nations for the benefit of the
Palestinian Authority.

The results of the report show say that USAID hired an
Egyptian accounting
firm to audit records:

In the case of the $5 million the United States spent on
Palestinian
Authority police salaries in 1994, USAID hired an Egyptian audit firm
to
accompany the PLO's paymaster to verify individual payment records and
to provide an overall accounting of disbursed funds.

Excuses, Secrecy, and Stonewalling

Excuses such as the following were reported in the GAO report and no
follow
up is available: “we did ask USAID officials to provide data on the
implementation
of oversight controls for 10 projects funded by USAID in the West Bank
and Gaza in 1994. Citing end-of-fiscal year work demands and the
absence
of key staff, USAID indicated that it could not provide us with the
requested
data in a timely manner.”

The GAO did not find any additional problems other than the
ones reported
in the 1995; however, the CIA report is still classified and the 1996
report
is not complete and further reports were promised by various agencies.
We have not been able to locate these reports and question the secrecy
surrounding these expenditures.

7. Arafat’s Reaction to the PNC Corruption Report,
London Al-Sharq
al-Awsat in Arabic 19 Aug 97 p 3 "'Arafat Is Dealing With the
Corruption
Issue Quietly and Without Overreacting"

8. The Denial, Cairo al-Wafd in Arabic 27 Aug 97 p
1

9. The Elephant Lobby, Newsweek, September 8, 1997

Appendix A:

[Posted by Mideast Realities, a pro-Arab group. September 7,
1997]

COURAGEOUS PALESTINIAN COUNCIL TAKES BOLD ACTION

ARAFAT DOES NOTHING. CORRUPTION CONTINUES UNCHECKED

MER - Washington - 6 Sept:

There is no State of Palestine and the situation is far more
comparable
to the Apartheid of old in South Africa than freedom. Indeed, the
Palestinian
people face a situation far worse today than was the case before the
Intifada.

The recent bold effort by the "Palestinian Legislative
Council" to expose
the extreme and blatant corruption by the Israeli-created "Palestinian
Authority" is quite unique.

The following article will appear in the September-October
issue of
Challenge Magazine about why and how the Palestinian Council spoke up
in
such an unprecedented manner:

Something's Rotten in the Nonstate of Palestine

Corruption under Arafat: the Legislators Speak

by Roni Ben Efrat with Assaf Adiv & Stephen Langfur

Within the Palestinian Authority (PA) there is an office
entitled General
Control (GCO). In May it issued a report that included a startling
claim:
because of corruption $326 million, roughly one fourth of the PA s
budget,
disappeared in 1996. The Palestinian Legislative Council (PLC), which
is
elected by the people, commissioned nine of its members to check these
findings. On July 29 they presented their report. In a stormy Council
session,
which Arafat did not bother to attend, the legislators called on the
president
to dissolve his government by September, form a new one based on
experts,
and bring those suspected of corruption to trial. Some of the gravest
suspicions
concern two of Arafat s senior ministers, Nabil Sha at and Jamil
Tarifi.

I asked Dr. Kamal Sharafi, who headed the committee of nine,
why the
Council found it necessary to check the report of the PA s comptroller.
Sharafi: "The GCO report was an important contribution toward correct
administrative
procedures, but it had flaws. There were simple arithmetical errors. In
many cases the GCO inspectors had written detailed accounts which did
not
make it into the final version. Many violations were ignored or left
hanging.
The main problem, though - which we have tried to correct - was the
lack
of conclusions. The GCO report failed to accuse persons by name,
whether
directors or ministers. You might have thought it was the Palestinian
people
that had stolen the money! The GCO did not ask the Attorney General to
formulate indictments. The result was a series of wishy-washy,
toothless
recommendations, calling weakly for reform and delivering a few hazy
warnings,
whereas what was needed was a cry for legal action."

The PLC Committee s "report on the report" notes further
flaws.

(1) The GCO failed to check important companies and public
institutions
that receive funding from the PA. These include the Petroleum General
Commission,
the al-Baher Company, the Tobacco Company, and the Palestinian
Broadcasting
Corporation. (Challenge has reported on the corruption in several of
these;
see Issues 39 and 43.)

(2) The GCO confined itself almost exclusively to Gaza. Its
report covered
less than a tenth of the ministries, institutions, municipalities, and
non-governmental organizations receiving benefits from the PA.

(3) It stayed clear of the many security forces, although the
Council
turned up evidence that they are full of illegal practices, meddling
where
they have no business. The GCO also kept away from President Arafat s
office.
(PLC Report, pages 3,4, and 30.)

The PLC Committee s mandate restricted it to checking the GCO
report.
It could not undertake an independent investigation into areas which
the
latter had not touched. Despite this limitation, and despite lack of
cooperation
on the part of the PA comptroller as well as several ministries, the
findings
are chilling. The overall picture is one of a mafia-style government,
where
the main point of being in public office is to get rich quick. The
Palestinian
citizen, after thirty years of neglect under Israel, has fallen into
the
hands of a ruling class whose motto appears to be, "Eat, drink and be
merry."
The PA budget and the funds from the donor nations flow around and
around
within the closed circle of the few, who live a life of luxury while
the
people they are supposed to serve go hungry. In matters of health care
and basic commodities, says the PLC Committee, the little person is a
victim
of dubious deals between the Palestinian and Israeli ruling elites.
This
conclusion may seem sweeping, but it arises from every page of the
Committee
s report. Except for the Ministry of Education and that of Statistics,
even the few untainted offices are described as inefficient and
unprofessional.
The report notes excessive duplication of tasks and overlapping of
responsibilities,
especially between the West Bank and Gaza.

The PLC Committee cites many kinds of corruption. There are
ministers
who violated their responsibilities to the point of endangering lives.
There are unsupervised bank accounts containing what are supposed to be
public funds. There are cronyism and nepotism, monopolies, releases
from
customs. Wherever greed can get its foot in, the space appears to have
been filled. In this article we shall concentrate on three ministries
where
corruption is especially rife. We shall then briefly survey most of the
others.

1. The Ministry of Health (Minister: Riad al-Zanoun)

Bad or expired drugs were used to treat cancer patients in
ministry
medical centers. With regard to other medicines as well, the Gaza
branch
of the ministry used drugs which the West Bank branch had rejected
because
they failed to meet specifications and had not been registered.
Suspicion:
Health ministry officials were (and are) in cahoots with a company
called
Al-Shifa, which imports medicines into Gaza. The report names Dr. Ziad
Sha th, general director of the ministry s pharmaceutical division, who
allowed Al-Shifa to bring in the unregistered drugs on the pretext that
registration was underway.

On another get-rich note, Al-Shifa imported several drugs as
donations
from Egypt: exempt, therefore, from customs and value-added tax (VAT).
It then turned around and sold them to the Health Ministry including
customs
and VAT. Suspicion: Al-Shifa was aided in this exercise by one Khamis
Najjar,
a director of the ministry in Gaza, and by the Minister of Civil
Affairs,
Jamil Tarifi, a name we shall soon encounter again. The Committee
recommended
that Arafat direct the PA Attorney General to prosecute the three men
named
above.

In addition, a fifth of the Health Ministry s budget went to
medical
expenses abroad. ("Abroad" includes Israeli hospitals.) The Council
found
this figure rather high. In some cases it was Arafat who ordered the
transfer
of patients abroad; he had the Finance Ministry deduct the money from
the
Health Ministry s budget without notifying the latter. There is also
the
case, still pending, of Dr. Ibrahim Abu Hmeid, who was appointed to
coordinate
the distribution of patients among hospitals in Jordan. Several
Jordanian
hospitals have accused him of receiving bribes and embezzling funds.
The
Committee asserts that he had accomplices. Its report also raises the
inevitable
question: Where in all this was the Minister of Health? (PLC Report,
pp.
7-8.)

2. The Ministry of Planning and International Cooperation
(Minister:
Nabil Sha at)

Nabil Sha’at is known to millions as one of the chief
Palestinian negotiators.

The council found many offenses. For example, any ministry is
supposed
to open a separate account with the Ministry of Finance for each of its
projects. Thus Finance holds the money given by funders for the
project,
and it can supervise expenditures. Sha at s ministry, however, opened
separate
accounts. Thus ministry officials could conspire with officials of a
donor
country, open an account together, and manipulate the funds without the
knowledge of Finance. This practice has also opened the door for
ministry
officials to appoint themselves to jobs in the ministry s projects,
giving
themselves fat second salaries. The private account gives rise to
another
perk as well: You hire someone to a project for a large salary, but by
prior agreement you pay the person less. The difference goes into what
is called a "black box." Sha at and his director-general control the
black
box. They hid it from the GCO, but the Council Committee found
it.

Other ills in the Ministry of Planning:

Tenders were granted under suspicious circumstances to
companies with
family connections to people in the ministry.

Within the ministry s projects, there was often no regard for
budgets;
purchase prices were high; there was a lack of competition and a lack
of
transparency.

The ministry used project funds to cash personal checks for
the Minister.

These practices have damaged the PA s credibility with the
donor nations.

The Committee has called for an investigation of Nabil Sha ath
together
with three of his deputies. (PLC Report, pp. 15-16.)

3. The Ministry of Civil Affairs (Minister: Jamil
Tarifi)

The Committee devotes four closely-written pages to this
ministry, to
which the GCO had given only scant attention.

The largest area of offense concerns the granting of
exemptions on import
duties, especially in the matter of automobiles. This can be a lot of
money:
the duty can amount to half the price of the (pre-duty) car. The right
to grant customs exemptions is vested in the Finance Ministry, not in
Civil
Affairs. The latter was able to get a foot in, however, in the
following
manner: All imported goods must enter through Israel. Israel collects
the
customs on goods which are destined for the Palestinian areas and then
transfers this money to the PA. Someone from the PA had to be present
at
the Israeli gateways, therefore, to tell the Israelis which goods to
exempt.
Logically, this should have been someone from Finance, but in fact it
was
Civil Affairs Minister Jamil Tarifi who got the task, perhaps because
of
his many Israeli connections, which date from before the Intifada.
Infringing
on the prerogatives of Finance, Tarifi personally exempted cars,
furniture,
and other goods, including the medicines mentioned above. The paperwork
was slipshod or nonexistent. Many cars, after receiving Tarifi
exemptions
in the name of this or that governmental body, were converted to
private
ownership. This was the case, for example, with a certain Mercedes,
which
wound up belonging to none other than... the Coordinator of Customs
Exemptions
in the Ministry of Civil Affairs.

At Oslo Israel permitted a few thousand PLO members to return.
The PA
granted them exemptions from customs. This opened the door to abuse:
many
a car was exempted on the fictitious claim that it belonged to a
returnee.
Such a one is Ibrahim Awad Abdel Qader Salameh, 75 years old,
supposedly
the proud owner of a brand new Jaguar. He does not get to use it much.
The family members of Minister Tarifi are always taking it out for a
spin.

A country without industry or natural resources depends
heavily on customs
duties. The loss of money through false exemptions amounts to a serious
blow.

Tarifi’s list goes on. Israel issues work permits, and the PA
s ministries
of Labor and Interior are supposed to distribute them. But here too
Civil
Affairs got a foot in -- again, it seems, thanks to Tarifi s
connections
with Israel; his ministry gets work permits and hands them out without
telling anyone.

Unknown to the Ministry of Finance, Tarifi illegally imposed
fees on
trucks bringing goods to and from Jordan. At one point, says the
Committee,
he got the Israelis to close the Jordanian border for two weeks to all
trucks bringing cement except those of a company called al-Karmel,
which
belongs to his eldest son.

The Committee sums up Tarifi s offenses by calling them "a
blatant attack
on public funds." It asks that the Attorney General bring the Minister
to justice. (PLC Report, pp. 17-21.) 4. Examples from other
Ministries.

Finance (Minister: Muhammad Nashashibi): The Council Committee
criticizes
this office for losing control in areas which it is supposed to
regulate,
like customs exemptions and project accounts. Several officials, it
notes,
took advantage of their positions to establish private companies. (PLC
Report, pp. 5-6.)

Agriculture (Minister: Abdel Jawad Saleh): The Committee found
evidence
of many violations, but it did not go into detail. (Ibid.,p.9.)

Public Works (Minister: Azzam al-Ahmad): Most purchases were
made by
direct order, always from the same importers, rather than by tender.
Mr.
al-Ahmad states that the violations took place before there was a
minister
for Public Works. (Ibid.)

Social Affairs (Minister: Intisar Wazzir): This office failed
to use
proper procedures in the handling of large donations and in
distributions
to the needy. (Ibid., pp. 9-10.)

Post and Communication: Among various offenses, this stands
out: Many
telephones which are supposed to be in government offices have found
their
way to the private homes of officials and employees. The PA pays their
phone bills. (Ibid., p. 10.)

Housing (Minister: Abdel Rahman Hamad): The earlier GCO report
noted
serious administrative, legal, and financial violations, most of which
occurred during the term of the former minister, Dr. Zakarieh al- Agha.
The violations include (1) a housing project which was carried out in
defiance
of regulations, using materials that did not match specifications; (2)
questionable allotments of land; and (3) the plunder of sand, one of
Gaza
s few and nonrenewable resources. The Committee made inquiries, but the
ministry failed to cooperate in response. (Ibid., p. 12.)

Interior. The GCO report exposed the manipulation of state
funds. The
ministry gave the Council Committee a "positive and reliable response."
(Ibid., p. 13.)

Culture (Minister: Yasser Abed Rabo): The minister charged the
public
$7,671 to install a central heating system in the house he is renting.
Almost 90% of the ministry employees are in administrative positions,
although
many lack educational qualifications. (Ibid., p. 14.)

Information (same minister). Large sums are budgeted for
purposes not
connected to the ministry s work, including a $10,000 personal
allowance
for the minister. (Ibid.)

Supplies (also called Rations) (Minister: Ali Shaheen): This
winter
people in Nablus got sick because they ate flour whose date had
expired.
A PLC member, Khussam Khader, exposed the case, showing that old flour
had been repackaged. The Council laid the responsibility on the
Ministry
of Supplies and passed a law redefining its role. Yet the ministry
continues
to interfere in the sale of flour. It worked in cahoots with a Finance
Ministry official, Muhammad Jaradah, using public money to import flour
through a company which Mr. Jaradah heads. The Supplies Ministry also
blocked
the border to other companies, so that Mr. Jaradah s would have the
monopoly.
(Ibid., p. 21.)

Transport (Minister: Ali Qawasmeh): Because of slipshod office
procedures
the PA has lost control over the use of government cars, though it pays
all the costs. The Transport Ministry illegally converted some
government
cars to private ownership without notifying Finance, which is supposed
to oversee public property. (Ibid., pp. 22-23.) Youth and Sport:
Ministry
officials used donated money, intended for renovating playgrounds, to
cover
private expenses. (Ibid., p. 23.)

Local Governance (Minister: Sa eb Erakat) This ministry
supervises municipalities
and village councils. The GCO report covered only thirty of the latter,
but it exposed administrative, financial and legal violations. The
Committee
demanded a response to the GCO findings, but the ministry has refused
to
cooperate. (Ibid., pp. 25-26.)

Monetary Authority. The committee found excessive and
unjustified expenses,
as well as discrepancies between financial files and daily books.
(Ibid.,
p. 26.)

TV and Radio Broadcasting Agency. Purchases and tenders are
not subject
to supervision. As in the case of all ministries and agencies, income
is
supposed to be transferred to the Finance Ministry for supervision and
control, but this is not done. (Ibid., p. 27.)

All nations suffer from corruption, but who would have
expected so much
so soon? One reason, the Committee report makes clear, is the chaos
that
prevails in rules and regulations, in defining spheres of authority,
and
in norms of financial management. (Ibid., p. 28.) All beginnings are
difficult,
and this is no exception. But other beginnings have a grace which this
one lacks. Such widespread corruption could not take hold if the
leaders
had any national feeling, or sense of community, or higher purpose.
These
things were surrendered at Oslo. The PA is the creature of Oslo, where
a national hope was betrayed for the sake of personal power. That was
the
arch-corruption. The present examples are its offspring.

Amid the gloom there remains a spark of light: the fact that
the PLC
Committee report could appear at all. Once again the legislative
council
has proved, despite its limitations, that there are those who seek to
establish
a new Palestinian society on foundations of sound administration and
public
rectitude. We spoke, for example, with Ali Girbawi, a professor in
Political
Science at Bir Zeit University and head of the Palestinian Independent
Commission for Citizens Rights. In response to the Committee report, he
said, "I think that the Palestinian Legislative Council has found its
own
strength. I don t think they were aware that they could do what they
have
done. Now they have realized that they have an impact. If they will
hold
the executive to account, the people will support them."

The Committee report exposed the alienation, even hostility,
between
the PA s executive and legislative branches. The entire Council
approved
the report, including PLO supporters close to Arafat, whereas most
cabinet
ministers took it as a declaration of war. Soon after its publication,
sixteen ministers gave letters to Arafat signaling their readiness to
resign
if he wished. (The sixteen did not include Nabil Sha ath, Jamil Tarifi,
and Yassir Abed Rabu.) Public opinion in the West Bank saw this
collective
performance merely as a ploy aimed at taking the sting from the report.
Kamal Sharafi, head of the Committee, told Challenge: "We didn’t ask
anyone
to resign. We only demanded that Arafat disperse the cabinet, bring in
the Attorney General, and put the guilty on trial. As far as we re
concerned,
any ministers who are cleared can become part of the new
cabinet."

In the meantime an additional factor has emerged. Even as the
PLC Committee
was conducting its investigation, Arafat appointed Taib Abed al-Rahim,
General Secretary of the Presidential Office, to make a detailed
inquiry
into acts of corruption. The result has been yet another report, 200
pages
long, which Arafat is keeping to himself. There are, then, three
studies
of corruption: that of the GCO, that of the PLC, and now this. The bevy
of reports may reduce the overall impact. If Arafat refuses to deal
with
that of the PLC and ignores its recommendations, the Council will be
exposed
in all its impotence. Kamal Sharafi, however, counsels against despair.
"Let s wait till September," he says. Meanwhile, corruption is
thriving.

* * * * * * * *

CHALLENGE Magazine is an independent journal in English which
reflects
on the realities of the Israeli Palestinian conflict. It is published
bi-monthly
and is one of the most forthright and courageous English publications.
Challenge Magazine, POB 41199, Jaffa 61411, Israel.

Appendix B:

PLO DOCUMENTS

June 26, 1995

Although there have been various citing of violations by the
PLO and
the PNA (Palestinian National Authority) of the agreements signed by
Arafat,
following are summations of recently-disclosed documents of specific
violations.
These not only demonstrate the disregard for the spirit of the
agreements,
but also indicate the urgent response required by the facilitator of
the
accords (the US) at this junction.

These documents are a series of top-secret documents --
exchanges of
letters between Muhammad Nashashibi, the PLO/PNA Minister of Finances,
and the leadership of the Palestinian Economic Council for Development
and Reconstruction (PECDAR). PECDAR was established on November 4,
1993,
as an independent body entrusted with the distribution of foreign
donations
for the rebuilding and improvement of the Palestinian economy free of
any
political considerations; Arafat and the PLO/PNA were to have no role
in
the administration of PECDAR. PNA can not have funds transferred from
or
to PECDAR. PECDAR is supposed to be supervised by the World Bank.
However,
in July 1994 PECDAR distributed an internal chart depicting it as being
directly subordinate to the PLO/PNA. Moreover, the entire leadership of
PECDAR is comprised of Arafat loyalists.

In general, all the 28 top-secret documents constitute a
series of 14
pairs: Each pair is comprised of (1) a letter over the signature of
Nashashibi,
the PLO/PNA Minister of Finance, with instructions to transfer funds to
specific individuals and projects, and (2) a response from PECDAR
confirming
that the instructions were followed and the monies transferred. In his
letters, Nashashibi invariably stresses that his instructions are on
behalf
of Yassir Arafat and/or based on Arafat's decisions. All the responses
from PECDAR are concluded with the request to inform Yassir Arafat that
the instructions were fulfilled and implemented. (Concerning the last
sentences
in the PECDAR letters: In some of the letters, the phrasing in Arabic
is
vague - that is, it could be read as either "the" instructions/orders
or
"his" [Arafat's] instructions/orders. In others, including Document 4,
the sentence reads specifically to inform Arafat that "his
instructions"
or "his orders" were implemented.)

Following are the Documents in order of importance:

Document 1

August, 1994. Nashashibi's instructions on behalf of Arafat to
funnel
$20 million to clandestine political activities inside Israel to
strengthen
pro-PLO forces, including Members of Knesset, and organizations as the
beginning of PNA political presence among Israeli Arabs. Nashashibi
writes
that Arafat ordered that "PNA's activities will expand inside Israel
and
concentrate on the Arabs and Palestinians inside", pushing them to work
toward "the establishment of the Palestinian State that includes the
city
of Jerusalem." Among the specific tasks of this prograrn are financing
political parties and individual politicians supporting the
establishment
of a Palestinian State, spread of financial support to local bodies,
social
organizations and charities in order to push them to political
activism.
Dr. Tibi is in charge and the money was deposited in his clandestine
personal
accounts abroad.

Document 2

August, 1994. Nashashibi's instructions on behalf of Arafat to
arrange
clandestine funding to acquire land in Jerusalem. The acquisition is a
part of the "consolidation of the foundations of the Palestinian States
while concentrating on Jerusalem in order to solidify our foot hold
there
and increase our activities there in an active and strong manner. " The
letter stresses the clandestine character of the deal "because we do
not
want to have this activity appear under the name of the PNA so that it
would not be utilized against us for political reasons in international
circles by the other side ... particularly the American
administration."
Therefore, $15m were allocated for clandestine transfer to Dr. Tibi for
a host of ostensibly private land acquisition and development projects
in East Jerusalem.

Document 3

August, 1994 (Following Document 2). Instructions on behalf of
Arafat
to arrange clandestine funding for apartments in Jerusalem to be given
to loyal Arabs. Dr. Tibi is to supervise this project for which $12
million
is allocated.

Document 4

November, 1994. Nashashibi issued instructions on behalf of
Arafat for
clandestine funding for Raymonda Tawil, Arafat's mother-in-law, and
Ibrahim
Qar'in to open a Palestinian publicity center, ostensibly independent
and
without acknowledgment of connection with Arafat, in "Arab al-Quds
[Jerusalem],
the Capital of Palestine." PECDAR's response stresses that Raymonda
Tawil
was thanking Yassir Arafat in person for the funding.

Documents 5,6,7

Discuss clandestine investment in computer companies of Ali and Mazan
Sha'at,
the sons of Dr. Nabil Sha'at (key negotiator with Israel). Nashashibi
not
only stresses that Arafat ordered the projects, but adds (in Document
5)
that "We must emphasize that the brother leader Abu-'Amar [Yassir
Arafat]
gives special importance to this company." It is note worthy that after
the Sha'at sons were provided with these funds, Dr. Nabil Sha'at was
nominated
by Arafat to the PECDAR board. This was done to ensure that no one
individual
would have a full understanding of the totality of the funds available
and their actual use.

Documents 8,9,10

Series of documents in which Nashashibi informs PECDAR that
Arafat decided
to order a close loyalist, Dr. Amin Haddad, to establish several
companies,
including import-export operations, under private auspices so as to
maintain
control over the local economy and employment in the West Bank. In its
response, PECDAR confirmed that the funds were transferred to Haddad's
private accounts, and (in Document 8) that they have Haddad's assurance
that "this stock company belongs to the PNA and is only a trust in his
hands."

Documents 11,12,13

Nashashibi writes to PECDAR that in order to establish
"effective control
over the commercial market," that is, to control the financial market
and
key import-export financing, throughout the West Bank, Arafat ordered
the
establishment of a series of import-export companies, insurance and
contracting
firms to be overseen by Jamil Tarifi, an Arafat crony. These companies
should also be established, and the funding for them be transferred, in
a clandestine manner so as to ensure that they appear privately
owned.

Document 14

Nashashibi writes that the establishment of a chicken farm was
directed
by Arafat in order to divert Palestinian workers from
internationally-controlled
development programs. He instructs PECDAR on behalf of Arafat to
clandestinely
transfer $1. 5 million to Ibrahim Qar'in. In its response, PECDAR
confirms
that the sum was transferred clandestinely from its "special accounts"
to the private accounts of Ibrahim Qar'in. Nashashibi concluded his
letter
with the comment that Arafat gives special importance to this project
because
it is creating a PNA-controlled employment. The PLO repeatedly seeks to
establish alternatives to the various development programs launched by
the international donors in order to ensure that the PNA/PLO remains
the
main and choice employer.

Appendix C:

Philadelphia Inquirer: U.S Gov't and European Community
Finance PLO
Broadcasts

Sunday, September 7, 1997

Broadcasts' warlike tone angers Israelis listening to a PLO
network.

By Barbara Demick

INQUIRER STAFF WRITER

RAMALLAH, West Bank -- A schoolgirl, perhaps 8 years old and
all nervous
giggles, stands before a television camera and sings in a squeaky
voice:

I am a daughter of Palestine . . .

Koran in my right hand, in my left -- a knife.

A slightly older girl with her ponytail wrapped in a checkered
kaffiyeh
gives an

emotional recitation of a poem for Palestinian leader Yasir
Arafat:

I am finished practicing on the submachine gun of return . .
.

We swear to take vengeful blood from our enemies for our
killed and
wounded.

We will board a bustling boat which will take us to Jaffa.

The girl approaches Arafat, who plants congratulatory kisses
on her
cheeks.

These are excerpts from children's programs broadcast on
Palestinian
television, a facility funded in part by American aid. They are the
basis
of what might be called Exhibits A and B in a case the Israeli
government
is mounting against the Palestinian Authority. It says the fledgling
Palestinian
radio and television network is being used as a powerful propaganda
tool
to incite hatred against Israel.

The excerpts are from broadcasts aired before three suicide
bombers
killed four Israelis in Jerusalem on Thursday, but they are considered
all the more incendiary by Israelis in the aftermath of the latest
Islamic
terror attack. The images of violence and death on the broadcasts are
especially
galling to many Israelis because of repeated pledges by Arafat to crack
down on terrorism. After a June 30 suicide bombing of a Jerusalem
market
killed 15 Israelis, Prime Minister Benjamin Netanyahu threatened to jam
the broadcasts. He didn't carry out the threat, but he is expected to
voice
the complaint when Secretary of State Madeleine K. Albright visits this
week.

The Palestinian Broadcasting Corp. is a creature of the 1993
peace accords,
which afforded Palestinians the first trappings of self-rule. The
``Voice
of Palestine'' radio broadcasts began in 1994, television the following
year.

The network was nurtured with about $500,000 in equipment and
training
from the U.S. Agency for International Development and with more than
$6
million in aid from the European Union, according to network chairman
Raddwan
Abu Ayyash. A spokesman for the United States Information Service in
Jerusalem
said he could find records for only $70,000 in U.S. aid spent on
training
and TV cameras, but he added that the United States provided other
funding
for the network.

The network is based in Ramallah, a sun-bleached West Bank
city that
has become the de facto seat of government for the Palestinian
Authority.
Abu Ayyash, a prominent journalist who was jailed by the Israelis in
the
1980s, denies the broadcasts incite, but concedes they relay an
increasingly
angry mood among Palestinians.

``I can't put love longs and dances on television when people
are being
killed,'' Abu Ayyash said, referring to Palestinians killed while
taking
part in attacks on Israeli soldiers. ``Journalists have to be part of
society
and reflect what is happening on the ground.''

To some extent the debate over Palestinian media mirrors the
larger
debate about

Arafat himself: The conflict between his conciliatory
statements, usually
in English, to diplomats, and his often incendiary speeches in Arabic
to
his Palestinian political constituency.

Israeli officials protested last month when Arafat embraced a
Hamas
leader and

delivered an anti-Israeli tirade to supporters in Gaza in
which he declared,
``all options are open'' -- a clear implication that armed struggle
remained
a possibility.

Palestinian TV broadcasts the usual mixture of sports, movies,
cartoons,
talk shows and news. Most of it is not nearly as violent as, say, the
police
dramas on American television, but the shows do reflect a society
preoccupied
with war and struggle. In a show about the opening of Palestinian
schools,
girls in frilly white dresses were shown dancing – incongruously --
with
Kalashnikov rifles that they twirled like batons. In another broadcast,
a schoolboy, asked what he got out of summer camp, answered: ``I am
defending
the homeland and undergo training like army drills.''

There is a children's quiz show about great figures in
Palestinian history
-- many of whom are considered heroes by Palestinians, but terrorists
by
Israelis.

One show featured Izz Al-Din Al-Qassam, a sheik who was killed
by the
British in

1935. The military wing of Hamas, the Islamic resistance
movement, which
has carried out many terrorist bombings in Israel, was named for
Qassam.

The heroine of another episode was Delal Al-Magribi, a woman
who commanded
a bus hijacking near Haifa in 1978. Thirty-four Israelis and nine
Palestinian
commandos, Magribi among them, were killed. The quiz-show emcee
referred
to Magribi as ``our sacred martyr.''

Under the peace accords, the Palestinians were allowed to set
up a police
force, but not an army. But it is hard to tell the difference in some
of
the Palestinian footage -- shot MTV-style with inspirational music
accompanying
shots of police marching in formation, drawing rifles and diving under
burning barricades.

In one rapid and heavily edited sequence in a music video, an
Israeli
soldier is shown firing a gun. Then, a quick cut and a shot of a girl
falling
in a forest.

The television excerpts were taped and translated from Arabic
by the
Palestinian Media Review, a private, nonprofit organization run in part
by former Israeli security specialists. English-language transcripts
were
shown to Abu Ayyash, who said they appeared to be accurate, but added
that
they represented only a few examples from hours and hours of
programming.

David Bar-Illan, Netanyahu's spokesman, says he is most
distressed by
the broadcasts designed to influence children. ``The unfortunate thing
is that it leaves very little hope for a better relationship between
the
two peoples . . . especially if children are being taught to hate
Israelis,''
he said.

Ghassan Khatib, an independent media analyst and head of the
Jerusalem
Media and

Communication Center, says the Palestinian programming has
grown more
militant since Netanyahu came to power in 1996, coinciding with the
souring
relationship between the Israeli and Palestinian leadership.

``I think in the beginning, when the Palestinian Authority
first took
over in 1994, they were speaking in a very moderate voice, avoiding
anything
that was very hostile or critical of Israel,'' Khatib said. ``Later, it
changed. The mood became hostile. I don't think the Palestinian
Broadcasting
Corp. is to blame. I think they are reflecting the views of official
Palestinians.''

One article in the peace accords says that Israel and the
Palestinian
leadership must ``foster mutual understanding and tolerance and shall
accordingly
abstain from incitement, including hostile propaganda.'' But exactly
what
constitutes incitement -- and what is merely the free expression of
opinion
-- is a matter of intense debate.

Itamar Marcus, codirector of the Palestinian Media Review,
says the
problem with Palestinian broadcasting lies not strictly in what is
said,
but in the mood created. ``It is a whole atmosphere of a nation
preparing
for war,'' Marcus said.

Marcus is particularly critical of Palestinian TV's habit of
broadcasting
maps of Palestine that include all of Israel -- not just the West Bank
and Gaza, the territories that Palestinians expect to make up a future
Palestinian state.

``There is no sense here that they are willing to accept
Israel as a
neighbor,'' Marcus said.

Voice of Palestine radio referred to Thursday's suicide
bombing as a
``terrorist attack,'' but in ``occupied Jerusalem.''

Under an unusual structure, the Palestinian Broadcasting Corp.
reports
directly to Arafat, bypassing the Palestinian Ministry of Information.
He is able to dictate its content while shaping a different message
when
addressing diplomats, Israel and the Western news media.

In September 1996, on the day before protests over a tunnel
opening
in Jerusalem's Old City led to clashes in which 61 Palestinians and 15
Israelis died, Arafat told Palestinian police: ``The believers shall
fight
for the cause of Allah. They shall kill and be killed. . .. . Our blood
is a small price to pay for the cause.''

Addressing a news conference as the clashes spread, he spoke
of the
need to ``calm the situation down.''

Last month, during another widely broadcast speech delivered
to the
Palestinian

legislative council during a visit by U.S. envoy Dennis Ross
in which
Arafat promised to crack down on terrorism, the Palestinian leader
said:
``We must confront them. We must confront them. . . . We must confront
them in every sense of the word.''

Arafat carefully refrains from any references to “the Jews''
or even
to ``the Israelis,” usually specifying that his anger is directed
toward
the Netanyahu government and often going out of his way to praise other
Israelis. With some exceptions, the same applies to other senior
Palestinian
officials.

The Israeli government, however, has complained about the
Mufti Ikrama
Sabri, who in a recent Friday prayer broadcast by radio from
Jerusalem's
Al-Aqsa mosque, called for ``Allah to take revenge on behalf of his
prophet
against the colonialist settlers who are sons of monkeys and
pigs.''

Abu Ayyash and other broadcast officials contend that if they
had the
resources to carefully scrutinize Israeli television, they would find
an
equal or greater number of inflammatory anti-Arab statements.

``People sometimes make extreme statements, especially on our
live shows.
I can't put plaster over their mouths,'' Abu Ayyash said. ``At times,
I've
tried to soften the mood, but if this is the way people think, these
are
the kinds of things they say.

``What I won't do, though, is become a branch of
Radio-Television Israel.
That is what Netanyahu would like us to do and that is an occupier's
mentality,''
Abu Ayyash said. ``This is Voice of Palestine. We have to reflect our
own
culture and our own history.''

END

Appendix D

(Miscellaneous)

PA Sets Up `Secret' Firm To Purchase Jerusalem Land -- More on
Plan
To Purchase Property

Tel Aviv HA'ARETZ in Hebrew, 19 Jun 95 p A4

[Report by Yosef Algazi and Nadav Shragay]

Additional documents, which seem to indicate the Palestinian
Authority's
[PA] intention to attempt to purchase real estate in East Jerusalem,
were
published yesterday. In reaction, PA Chairman Yasir 'Arafat called this
"yet another cheap plot." A statement published by a PA official
yesterday
said that the PA had decided to demand that the Israeli Government
conduct
a thorough investigation "in order to discover who was behind this
distribution
of false documents."

According to the PA, the documents published yesterday and on
17 June
were forged as part of a disinformation campaign by extreme right-wing
circles with the aim of sabotaging the peace process on the eve of the
signing of the new agreement. "They seek to embarrass the Israeli
Government
more than they want to embarrass the PA. It is no coincidence that some
of the people mentioned in the documents are employed at the Orient
House
in East Jerusalem," the PA official said. The PA was reportedly
considering
legal suits against some of the newspapers which published the
documents.

Yesterday, Dr. Ahmad al-Tibi said that PA Treasury officials,
when presented
with the documents, asserted: "these are childish forgeries. The
documents
are written in faulty Arabic and the forged signature of Treasury head
Zuhdi al-Nashashibi is not very convincing."

Among the documents disseminated yesterday is a letter
allegedly sent
in August 1994 from the Palestinian Economic Committee on Development
and
Reconstruction (PECDAR) to PA Treasurer Muhammad Zuhdi al-Nashashibi.
The
letter confirms that PA Chairman Yasir 'Arafat's instructions with
regard
"to establishing a real estate company centered in Jerusalem, which
would
purchase properties in East Jerusalem, the capital of the Palestinian
state,
and the Old City" have been fulfilled.

Right-wing sources claim that analysts believe that the letter
-- a
copy of which was sent to HA'ARETZ -- came in reply to the instructions
on the matter sent 10 days earlier by al-Nashashibi to PECDAR (which
were
reported by HA'ARETZ yesterday). The missive stated that contact had
been
made with "brother Ahmad al-Tibi," and that the latter had supplied
"the
financial information, the way, and the means," in which he preferred
to
receive the sums needed to begin the project.

According to these sources, the letter, signed by Samir
Hulaylah, an
aide to Abu-'Ala' [Muhammad Quray'], states: "the money-transferring
process
is sophisticated and convincing, and the other side, regardless of its
ability, will be unable to discover how the transfer was made. We have
contacted the financial source which transferred (the sum) to him, and
he has confirmed the money's arrival. We wish to inform brother
commander
Abu-'Amar [Yasir 'Arafat] that the orders have been implemented fully
and
in complete secrecy."

The sources claim that the letter is printed on official
PECDAR stationary
and is marked "top secret," just like the PA's instructions on this
matter
to PECDAR. The letter also carries a handwritten message stating: "the
perusal of this document is forbidden without special permission from
the
president."

An investigation by HA'ARETZ into the identity of the members
of the
special committee, reportedly mentioned in the PA's letter of
instructions
to PECDAR (published yesterday) indicates that at least some of them
were
indeed involved in land deals and money issues pertaining to the
Palestinians
in Jerusalem.

Over the past few months, many properties have been purchased
in East
Jerusalem with the PLO's encouragement. One of them is a house on
Qumranim
Street in the Old City purchased from a man called Samir Hazu.

Two other letters received by HA'ARETZ yesterday show that in
August
1994, the PA instructed PECDAR, via al- Nashashibi, "to purchase
buildings
containing ten apartments or more," and allocated $12 million for this
purpose. PECDAR is warned that this activity should not be conducted on
behalf of the PA, "in order to avoid exposure (of the PA)." These
letters
also mention Dr. Ahmad al-Tibi as the head of the committee handling
the
matter.

PECDAR's reply to al-Nashashibi from 31 August 1994, says that
"the
transfer of $12 million in the same way is no longer possible," and
that
"half the sum ($6 million) can be transferred at once with the other
half
being paid a month later." The letter states: "Brother Dr. al-Tibi has
agreed to divide the sum and said that there is no urgent need at the
moment
and therefore a delay will cause no harm." These two letters are also
classified
as "top secret."

'Arafat Said Using PA Funds for Jerusalem Land

Jerusalem Channel 2 Television Network in Hebrew, 1800 GMT 19
Oct 95

[Political correspondent 'Imanu'el Rosen video report]

[Anchor 'Adi Talmor] Yasir 'Arafat tried to use funds donated
to the
Palestinian Authority [PA] to take over land in Jerusalem and to
support
Israeli Arab parties, according to PA secret internal documents. The
liaison
is Ahmad al-Tibi. The Palestinians claim the documents are forged. Our
political correspondent 'Imanu'el Rosen has the details:

[Begin recording]

[Rosen] These are the offices of PECDAR [Palestinian Economic
Committee
on Development and Reconstruction] in Ramallah; in other words, the
body
responsible for the flow of funds to the PA. Here the decisions are
made
on how to divide up the millions of dollars donated by the donor states
and the United States.

These documents, which reached Likud Knesset Member [MK] Beni
Begin,
on the face of it show that the PA has ambitious and much more
embracing
aims than just autonomy on the West Bank. In these four letters, PECDAR
promises PA Finance Minister Muhammad al- Nashashibi to act on
'Arafat's
instructions to purchase land and houses in East Jerusalem and to
transfer
funds to Israeli Arabs and Arab parties running in the Knesset
elections.

For example, one of the letters by al-Nashashibi to the PECDAR
chairman
says: Leader Abu-'Ammar -- that is, 'Arafat -- has decided that PA
activity
will be expanded to Israel and will focus on Palestinian Arabs inside
Israel
in the following areas - - we will mention only two: to help the Arab
parties
that support the establishment of a Palestinian state and to aid local
councils in financial trouble. PECDAR's reply: You are requested to
tell
brother leader Abu-'Ammar that the order has been implemented in full
secrecy
and to pay attention to the type of activity. Some $10 million is
mentioned.

[Begin] These documents prove that we should no longer have
any illusions.
For the PLO, the Oslo agreement cannot end at the Green Line. The PLO
sends
its long arms into the State of Israel.

[Rosen] On Jerusalem, al-Nashashibi writes to PECDAR: Since
the PA is
dealing with the establishment of support systems for the foundations
of
the Palestinian state and since we do not want that activity to be
appear
in the PA's name, our leader and brother -- that is, 'Arafat -- decided
to set up a land company based in Jerusalem to deal with the
procurement
of land in East Jerusalem. The company's manager will be Dr. Ahmad
al-Tibi.
PECDAR's response: We were in touch with Dr. al-Tibi and received from
him information about the bank and how he prefers the initial funds for
the plan -- $15 million -- to be transferred. The transfer of the funds
is to be executed in a sophisticated way so that no side can find out
how
it is done. By the way, all the documents are headlined Top Secret and
carry 'Arafat's unequivocal order to keep the activities secret. [end
recording]

[Talmor] We now have 'Imanu'el Rosen in the studio. 'Imanu'el,
the Palestinians
firmly claim that the document is forged. So what is their
credibility?

[Rosen] They also said six months ago that a copy of a similar
document
was forged. Al-Tibi hired investigator Eli Sade, who examined the
documents
and found faults. For example, the fact that the letters by
al-Nashashibi
-- who is completely nonreligious -- twice carried the expression
bismallah
[in the name of God]. Sade reached the conclusion that the documents
are
forged. Al-Nashashibi claimed that his signature on the documents is
authentic,
but that they contained falsifications. We showed Sade the new
documents,
which are originals. He has still not been able to give us his
findings,
but he has a feeling that these are also forged. We note that other
elements
believe that these are authentic documents.

[Talmor] If it transpires that the documents were written by
the PA,
what is the significance?

[Rosen] Whether they are authentic or not -- or something in
between
-- Israeli defense sources and others have been saying for a long time
that these are the PA's chief aspirations: On the one hand, Jerusalem
and
all that that signifies; on the other, Israeli Arabs. Al-Tibi has
already
announced he will be running in the Knesset elections. These things
should
therefore not surprise us since they merely reconfirm information we
already
have.

[Talmor] Here are reactions to the report: The Likud said it
is additional
proof that the government has a systematic policy to divide Jerusalem.
Likud Secretariat Chairman 'Uzi Landau said that during the Knesset's
winter
session he will raise a motion stipulating that over 80 MK's will be
required
to approve concessions on Jerusalem.

Tzomet said that it has often called for pressing charges
against al-Tibi
for collaborating with the enemy although he is an Israeli citizen, but
all its demands have been rejected by the government, which itself
collaborates
with 'Arafat.

West Bank: Hawatimah on 'Corruption,' 'Arafat Ties

Amman al-Majd in Arabic 11 Aug 97 p 5

Interview with Nayif Hawatimah, secretary general of the
Democratic
Front for the Liberation of Palestine, by Mary 'Isa in Damascus; date
not
given

[Hawatimah] ... Nonetheless, this is hard to achieve as long
as the
Palestinian Authority continues to repress the national ranks, as long
as corruption is uncurbed, and as long as the people's funds continue
to
be squandered without fear of punishment. That is why we are engaged in
a dialogue with the leaders and rank and file in the Fatah Movement and
Hamas [the Islamic Resistance Movement] as well as with nationalist
figures.

['Isa] Have you taken notice of the reports prepared by the
Central
Control Commission regarding the spread of huge corruption within the
lobbies
of the Palestinian Authority? If your answer is in the affirmative, how
would you comment on this?

[Hawatimah] We have in our possession a report prepared by the
Central
Control Commission, which came in 600 pages; a report prepared by the
Ministerial
Committee headed by al-Tayyib 'Abd-al- Rahim, which came in 129 pages;
and a report prepared by the Legislative Council's Financial Committee,
which came in 60 pages. All these reports show that the octopus of
corruption
is spreading in all areas of the Palestinian Authority and its security
and intelligence arms. Furthermore, these reports recommended the
resignation
of the entire Palestinian cabinet. They acknowledged that $326 million;
that is, 43 percent of the 1996 budget, was embezzled; that 35 percent
of this budget was spent on security agencies; and that 12.5 percent of
the budget went to 'Arafat's office. Some 9.5 percent of the budget;
that
is, $73 million was left to the entire population of the West Bank and
the Gaza Strip, who total 2.5 million people. With regard to the
Palestinian
diaspora, they got nothing of this budget.

Before these reports saw the light of day, we urged 'Arafat to
heed
the appeals of the people and realities in this regard. This was
contained
in a letter I sent him through 'Abbas Zaki [member of the Fatah Central
Committee and member of the Palestinian Legislative Council] in reply
to
an oral message 'Arafat sent me in April through Zaki. In our appeals
in
this regard, we clearly underlined the need to deal blows to Mafia
gangs
and corruption within the lobbies of the Authority's organs.

Now, these reports, all of which were prepared by the
Authority itself,
recommend the dismissal and trial of five ministers, rebuking two
others,
and questioning another. They also demand an investigation of why
monopolies,
chief among which are the Petroleum Corporation, the al-Bahr Company,
the
Tobacco Company, the Cement Corporation, the Palestinian Broadcasting
Corporation,
and the Cereals Corporation were placed under the control of brother
'Arafat's
office. Likewise, the revenues of 12 basic commodities do not find
their
way to the Authority's treasury, are not subject to auditing, and are
not
deemed part of the general budget; not to mention the second budget
[the
second treasury], whose assets are deposited in four Israeli banks.
These
assets are in excess of $500 million. These assets, which are fetching
16-23 percent interest, are used for speculation on a par with the
shekel.

This is a far cry of the hunger suffered by our people in the
West Bank,
the Gaza Strip, and East Jerusalem. This also shows how the Palestinian
Authority is neglecting the Palestinian diaspora, who unleashed the
revolution
and the PLO. This is a joint far cry appealing for an end to
corruption,
and for the dismantlement of these institutions, so that there may be
room
for the launch of new institutions that would be highly efficient,
trustworthy,
and accountable. Consequently, we demand public trials attended by
human
rights organizations and representatives of donor nations to curb the
spread
of corruption that has spared nothing.

['Isa] But some of the ministers whose names were mentioned in
the reports
said that the charges against them are politically motivated and that
they
are aimed at dismissing them.

[Hawatimah] I firmly believe that these ministers want to turn
their
backs on all these reports that implicated them in corruption scandals.
I would like to tell you in all honesty that the reports, copies of
which
are in our possession, are clear. Moreover, several officials
affiliated
with the Palestinian Authority, including Hanan 'Ashrawi, 'Abd-al-Jawad
Salih, and others, commended the accuracy of the reports. However, they
affirmed that these reports did not address the activities of the
monopolies
working under the direct supervision of brother 'Arafat's office. Given
all of the above, all files must be opened and referred to court. First
of all, all the ministers whose names are mentioned in the reports must
be relieved of their posts and sent to court, as happens in all world
states.
They must undergo transparent trials in the presence of international
observers.

['Isa] With regard to 'Arafat, is it possible that he is
unaware of
this huge corruption?

[Hawatimah] We within the revolution and the PLO, as well as
Palestinian
laymen, cannot assume that the ruler is good and that it is his
entourage
that is corrupt. I will address this issue in a book that will see the
light of day soon. The ruler is well aware of many things being done by
his entourage. Nonetheless, he is not necessarily aware of all the
minute
details. He knows a lot about what is going on around him. The
self-rule
authority is coming face-to-face with a huge report. There is huge
corruption,
and brother Abu-'Ammar is aware of many things in this regard.

CHRISTOPHER REMINDS ARAFAT OF NEED FOR ACCOUNTABILITY

At their meeting yesterday in Gaza, US Secretary of State
Warren Christopher
reiterated to PLO Chairman Yasser Arafat the need to cooperate with the
international community's requirement of economic accountability as a
precondition
for receiving economic aid. The potential donors and the World Bank are
still endeavoring to help the Arabs understand the need for
documentation.
Yediot
Ahronot, 22 July, 1994

ARAFAT CALLS "FINANCIAL ACCOUNTABILITY" A SLOGAN

PLO Chairman Yasser Arafat reduced demands for financial
accountability
to keep track of money granted to the Palestinian Authority to being a
mere "slogan". Arafat then claimed that delays in transferring promised
funds from donor countries was endangering autonomy and the future of
the
peace process. Ha'aretz & Jerusalem Post, 13 September 1994

PLO FUNDS MISAPPROPRIATED

According to a report in the London Sunday Times of November 6, 1994,
two
international donor states and a U.N. agency are investigating
allegations
that aid to the PLO has been misappropriated.

Monies that were to be used to pay the salaries of PLO police
officers
were used for a shadow security force under the leadership of Yassir
Arafat.

A senior official of the U.N. Relief and Works Agency
(U.N.R.W.A.),
who was responsible for the handling of $500,000 that was to be given
to
the police. The official has been summoned to the Austrian capital to
explain
what happened to the money. The official, Jabr Nabahim, has also been
charged
with diverting $100,000 to his private bank account. Jerusalem Post,
July 7, 1994

PALESTINIAN AUTHORITY BEING PROBED FOR MISAPPROPRIATION OF
FUNDING

The London Sunday Times reports that two international
donor
states and a UN agency are investigating allegations that British
overseas
development aid intended to pay salaries of Palestinian police was used
instead for a shadowy security force under the command of PLO Chairman
Yasser Arafat, according to the London Sunday Times. (Jerusalem Post,
7 November 1994)

PLO HAS $10 BILLIONS IN ASSETS

The PLO has $10 billion in assets and an annual income of $1.5 -$2
billion
mainly from illegal activities; this according to a report from
Britain's
National Criminal Intelligence Services (NCIS) given to the Government
Accounting Office (GAO) the auditing arm of the US Congress. The NCIS
also
termed the PLO a national security threat. The GAO report was compiled
despite obstruction from the US State Department. This and more
evidence
countering the PLO's claim that it is broke has prompted US legislators
to request a May 31, 1994 report by the GAO detailing PLO's assets
worldwide.
Interest in the GAO document comes as Prime Minister Yitzhak Rabin is
in
Washington to urge President Clinton to speed up its promised $500
million
donation to the PLO.

According to American Intelligence sources, the PLO
participated in
a number of terrorist attacks against US targets and in 1993, after the
Gulf War, the PLO, Hamas and Hizbullah signed a pact of cooperation in
Khartoum jointly pledging to fight America and the West. The pact has
never
been rescinded. (Reported by Rachel Ehrenfeld, author of "Narcoterrorism"
and "Evil Money", ) Jerusalem Post, November 23,
1994

PEACE WATCH: AID TO PALESTINIAN AUTHORITY WENT TO PLO
SUPPORTERS
IN LEBANON

On the eve of the donor nations' conference in Brussels
yesterday, Peace
Watch (an independent, non-partisan monitoring organization) published
a detailed report on international monetary aid to the Palestinian
Authority.
The report includes the revelation that most of the first 'portion' of
aid, $13 million, was sent to fund the PLO in Lebanon to prevent
defection
from the ranks of Fatah to opposition groups there.

The report detailed why donor nations are slow to come through
with
their promised aid to Palestinian Council for Development and
Reconstruction
(PECDAR). The reasons include 1) PLO Chairman Yasser Arafat's refusal
to
comply with the donor nations' fundamental condition that accounting
and
bookkeeping be done properly. 2) Arafat appointed as PECDAR head Farouk
Kaddoumi, head of the PLO's political department, who is well known as
an opponent of the Declaration of Principles and represents Fatah's
most
radical wing. Making the basic internal disagreements within the PLO
imbedded
within the PECDAR structure. 3) Despite the fact that Arafat agreed
that
PECDAR would be the mechanism for the transfer of financial aid to the
Palestinian Authority, his men have established parallel apparatuses
and
are encouraging donors to funnel money through them instead. (Peace
Watch
Press Release November 28)

Despite this, the World Bank signed an accord with PLO
Chairman Yasser
Arafat for $58 million in credit to the Palestinian Authority for
emergence
projects. The money is being provided by Saudi Arabia ($30 million),
Denmark
($18 million), and Switzerland ($10 million). Jerusalem Post November
30)

Last week, Tourism Minister Uzi Baram was asked in a radio
interview,
"What if the Palestinians continue to attack us even if they do get
enough
money to rehabilitate Gaza?" He replied, "I'll go to the American
Consulate
and apply for a visa." (Jerusalem Post , November 22, 1994)

U.S. IS DISAPPOINTED IN ARAFAT

PLO Chairman Yasser Arafat disappointed the United States by
criticizing
the international community for not supplying promised economic aid to
the autonomous areas. According to U.S. sources, Arafat has ignored
repeated
American and international requirements to organize accountable
financial
institutions to distribute the $2.4 billion in promised aid. The U.S.
has
pledged $500 million to the autonomous areas. Jerusalem Post, 7
July,1994

The Washington Times

Arafat misusing U.S. aid, GAO analysis, letters say

by Jamie Dettmer, The Washington Times
August 5, 1995

PLO Chairman Yasser Arafat has used millions of dollars in
international
and U.S. aid to fund clandestine political operations in Jerusalem,
according
to documents obtained by The Washington Times.

Copies of Palestinian Authority correspondence show that the
Palestinian
Economic Council for Development and Reconstruction (PECDAR) - a body
almost
completely funded by international donors including the United States -
has secretly purchased land in Jerusalem in a bid to strengthen PLO
claims
to the city.

The letters also show PEDCAR funds have been used to reward
Mr. Arafat's
friends and relatives, including his mother-in-law.

They indicate that Mr. Arafat, president of the new
Palestinian Authority
in Gaza and the West Bank, has sought to use international aid to
strengthen
political allies at the expense of non-members of his al-Fatah faction
of the Palestinian Liberation Organization (PLO).

The United States donated $100 million to the Palestinian
Authority
last fall on the understanding that the money would be used to develop
the economies of Gaza and the West Bank. Republican congressmen
recently
voiced alarm at increasing reports of Mr. Arafat's alleged misuse of
international
donations.

Rep. John Saxton, New Jersey Republican, who has secured his
own copies
of PEDCAR correspondences condemns Mr. Arafat’s diversion of U.S. and
European
Union aid to “projects in direct violation of the peace agreements with
Israel.”

Mr. Saxton is seeking a hold on any further U.S. money being
sent to
help the fledgling Palestinian state. Nearly S500 million is to be
donated
to the Palestinians later this year.

“I believe that before we spend another dollar on aid to the
PLO, we
need certain questions answered - namely, how much of our aid is being
used to advance the condition of the Palestinians and how much is being
used to fund the pet projects of Arafat?”

Sen Alfonse D'Amato and Rep. Mike Forbes, both New York
Republicans,
have introduced legislation that would cut off further aid unless
stringent
conditions are met.

Rep. Benjamin Gilman, chairman of the House International
Relations
Committee, has also cast doubt on the need for massive international
aid
to the PLO, which governs the Palestinian Authority.

Prompted by a British intelligence assessment that the PLO has
assets
worth $8 billion to $10 billion and annual revenues of up to $2
billion,
Mr. Gilman requested in May a General Accounting Office analysis of the
finances of the PLO.

The GAO report was completed in June, but in a highly unusual
move,
the CIA insisted it be classified. U.S intelligence sources have told
The
Times that the analysis basically confirms the British findings. Mr.
Gilman
has written to the GAO comptroller general demanding that the report be
published.

The Palestinian Authority documents secured by The Times
consist of
letters exchanged by Mr Arafat's finance minister, Muhammad Zuhdi
Alnashashiby,
and the PEDCAR chairman.

The letters were written last summer and all, shortly after
international
aid started to flow. All the letters are marked “Top Secret” and “Not
to
be read without the permission of the president.”

One letter from Mr. Alnashashiby lists among the group's high
priorities
the building of a PLO presence in “holy Jerusalem.”

It informs the PECDAR chairman that Mr, Arafat wants to set up
a land
corporation in Jerusalem with an initial capital outlay of $15 million.
The corporation's activities must not be traced back to the Palestinian
Authority, it cautions.

Mr. Alnashashiby writes: “We stress that it is the desire of
the comrade
leader Abu Amar [Mr. Arafatl that the meetings of this group be held
secretly
and its activities should not be noticed and it should keep its
documents
and registries away from the other party [Israel].”

PEDCAR correspondence also shows that $20 million was secretly
used
to fund covert political activities, including the financing of
political
parties and the reequipping of a Palestinian newspaper, the Journal of
the Return.

An additional $12 million was allocated on orders of Mr.
Arafat tor
the purchasing of apartments in Jerusalem. These apartments were to be
given to al Fatah loyalists.

Throughout the correspondence, Mr. Alnashashiby stresses the
importance
of keeping money transfers secret.

The Palestinian Authority and the World Bank Will Bypass
Pecdar:
Foreign Aid Will Now Be Transferred Directly to the PA . The Holst Fund
Has Temporarily Stopped Dispensing Aid, Peace Watch, September 13, 1995

The Palestinian Authority (PA) and the World Bank agreed last
week to
bypass the Palestinian Economic Council for Development and
Reconstruction
(PECDAR) and transfer aid directly to the PA via its economic
ministries,
primarily the Ministry of Finance, headed by Mohamed Nashashibi.
According
to Peace Watch sources, both at the PA and the World Bank, PECDAR will
cease to be the address for foreign aid to the PA and the account
manager
for the Holst Fund.

PECDAR, headed buy PA Minister of Economics Ahmed Quria, was
originally
created in 1993 as an institution designed to uphold Western standards
of "transparency and accountability: and to be the official address for
foreign aid to the PA. PECDAR's existence was a central condition of
the
PA receiving the $2.5 billion aid pledged over five years by the donor
nations in Washington (October 1993). From the perspective of the donor
nations, concerned about the PA's commitment to basic financial
standards,
the decision to bypass PECDAR could be seen as a retreat from the World
Bank's long-standing demand that the PA maintain certain standards of
"transparency
and accountability."

As detailed in previous Peace Watch Reports, ever since the
creation
of the PA there has been tension and competition for funding between
PECDAR,
the Finance Ministry and the Ministry of Planning, headed by Nabil
Sha'ath.
The competition between the various ministries also led to confusion
among
the donor nations, with many unsure of the correct address for their
aid.
Only last month, according to sources among the donors, Nabil Sha'ath
sent
a letter to all the donor nations stating that he was the official
address
for aid within the PA. Accordingly, the designation of the Finance
Ministry
as the main recipient of foreign aid came as a surprise to many donors.

The new arrangement is likely to affect the donor nation
conference,
set to convene after the signing of the interim agreement between the
PA
and Israel. Without PECDAR as the recipient, it is possible that the PA
will have more leeway in spending foreign aid. According to Peace Watch
sources, the conference will be held in Madrid in the middle of
October,
and not in Washington as previously expected where now there will only
be a meeting of Ministers and experts.

In another development, sources at the World Bank have
revealed to Peace
Watch that the Holst Fund has not been operating since June and recent
contributions to the fund have not been transferred to the PA. The only
money that has been transferred has been to pay police salaries for
June
and July. As a result of the suspension of operation of the Holst Fund
other employees of the PA have not received their full June and July
salaries.
The workers received advances on their salaries from unknown sources,
most
likely in the form of loans from Palestinian banks in the territories
and
from direct European aid to the PA.

According to sources at the World Bank, from its inception
until it
stopped dispensing aid in June 1995, the Holst Fund had disbursed
$108.5
million to the PA via PECDAR. At the end of July, the Holst Fund had a
balance of more than $20 million, including $438,000 from Australia,
$310,000
from Austria, $2.5 million from Israel, $4 million from Italy, $3
million
from Japan, $130,000 Luxembourg and $2 million from the UK. An
additional
$35 million has also been pledged by the donor nations to the Holst
Fund.
After a formal agreement is signed between the World Bank and the PA on
the new function of the fund, it is expected that the money will once
again
flow from the Holst Fund to the PA via the Finance Ministry.

Flourishing Deals Overseas

Who, Today, Controls the Economic Empire Which the PLO Created
Overseas?
"Arafat and His Friends Are Not Transferring the PLO's Overseas Assets
to the Ownership of the [Palestinian] Authority," Says Palestinian
Council
Member Khosam Hadad. "This Is One of Our Economy's Biggest Disasters."

Where is the money? This question disturbed many people last
week, following
the publication regarding Yasser Arafat's secret account. "Where is the
money?" asked the residents of the Palestinian Authority as they sought
to clarify what exactly is being done with the taxes collected by the
monopoly
owners and those who control the crossings and loading zones. "Where is
the money?" the Knesset Finance Committee sought to clarify, on
Tuesday,
in a special discussion, which was convened following the findings of
the
Ha'aretz "Weekend Supplement" (4.4.97), to which senior Israeli Finance
Ministry officials were summoned. "Where is the money" asks Palestinian
Legislative Council member Khosam Hadad, this time meaning the PLO's
overseas
assets.

The size and worth of these assets -- which the Palestine
Liberation
Organization has accumulated in the 33 years of its existence -- are
still
a mystery. "Nobody knows the truth about the PLO's assets abroad," says
former minister Moshe Shahal. "In the peace talks, we did not dare to
raise
the issue." Who controls these assets today?

The PLO was a very powerful economic organization, that has
received
billions of dollars from Saudi Arabia and the Gulf states since 1967. A
large part of the assets come from taxes levied by the Arab countries:
approximately 5% of the salary of every Palestinian who worked in their
areas was deducted at the source and transferred to the organization's
accounts in Switzerland and Spain. This collection alone brought in
approximately
$50 million annually. "In total, the PLO made profits of something like
$50 million a day," said Eli Halachmi, who was head of the economic
branch
in the research arm of IDF Military Intelligence at the end of the
1970s.
"The organization had astounding properties. They had many straw
companies
which aided their penetration of the European market. The Kuwaitis
helped
them buy shares of companies such as Mercedes. They exercised great
economic
influence in France, Switzerland, Italy, Holland and Scandinavia."

In order to rule over its economic operations, in 1970 the PLO
established
the organization "Samed", or by its full name "The Organization of the
Sons of Palestinian Martyrs", which has been headed since then by Ahmed
Kari'a (Abu-Allah). Samed conducted many investments in the name of the
PLO and its management was highly secretive and directly reported to
Yasser
Arafat, who also personally signed its cheques. Part of Samed's
activities
the PLO was interested in revealing, from a public relations
standpoint.
The organization published a magazine, "Samed al-Iktzadi" (The Economic
Samed), with many pictures of Palestinian women working at sewing and
weaving
and Palestinian men sowing fields in agricultural farms in Africa and
Lebanon.
According to the statistics given in Guy Bechor's "PLO Lexicon", Samed
employed several thousand workers in Lebanon until Israel expelled them
in 1982. They were considered Fatah activists in every way, including
in
the compensation tables, for example.

Under the umbrella of Samed a number of associations operate
including
the Manufacturer's Association, the Trade and Marketing Association,
the
Agriculture and Agricultural Produce Association, the Research and
Publications
Department, and the Department for Disseminating Films and Propaganda.
The latter initiated and distributed a number of propaganda films and
films
pertaining to the Palestinian struggle. At the end of the 1980s, it
initiated
the production of a full length film and invested millions of dollars,
including the drafting of foreign actors and cameramen. The raw
material
was sent for editing in a laboratory in Rome. One night in July 1989,
the
laboratory was broken into and not a trace of the Palestinian's film
was
left.

The Samed magazine identifies its' branches economic
activities and
in general, reports on the organization's participation in a large
number
of economic exhibitions and its joint activities with the countries of
the Eastern Bloc (until it fell apart) and with black Africa. Samed
opened
20 Chambers of Commerce in various countries, such as Japan, Thailand
and
China in Asia, Guinea and Mali in Africa, Hungary and Poland in Eastern
Europe, and France and Italy in the West. In its record years, Samed
had
26 set exhibitions. The reports of Samed acknowledge its participation
in weapons factories. The organization noted that it has a weapons
factory
in South Yemen and in Princedom of Brunei. Guy Bechor shows that at the
end of the Iran-Iraq War in 1988, Arafat presented a gift of an RPG
launcher
manufactured by Samed to Iraqi President Saddam Hussein

It is a little difficult because of this to take at face value
the words
of Dr Maher al-Kurd, the Palestinian Authority's Deputy Minister of
Economics
and Commerce. Dr al-Kurd absolutely and categorically denies
everything.
According to him, Samed's assets consisted of farms, for the most part
farms in Lebanon which were destroyed by the IDF invasion in 1982.
"After
the war", adds al-Kurd, "they were left with a few projects in Africa,
mainly in Somalia and Sudan. The civil wars and drought in those
countries
destroyed the farms. Samed had no property other than farms. No shares,
no Swiss bank accounts. If only all the rumors were true."

It is difficult to estimate how much the PLO's assets are
really worth.
In an article published by Eric Lurun in "Le Figaro" he claims that
hundreds
of millions of dollars of PLO money was transferred from Lebanon to
Switzerland
at the beginning of the IDF siege of Beirut in 1982. Already in the
1970s,
with the help of the Soviet Union, and in particular the "Moscow
Narodny"
Bank, Arafat and a number of his aides arranged investments on Wall
Street,
in the City of London, and in a number of Arab banks. The PLO also
invested
in large industrial concerns that were floated on the Frankfurt, Tokyo
and Paris stock exchanges, as well as in real estate in the Mayfair
area
of London. Until the Gulf War in 1991, writes "Le Figaro", the cash
reserves
of the PLO came to $7 million. Arafat divided this mighty sum between a
number of accounts in Zurich and Geneva, in such banks as Union of
Suisse
Bank, and Chemical Bank of New York. In Israel, the figures cited in
"Le
Figaro" are considered exaggerated, but the assertion that the PLO was
in the 1970s and 1980s a very strong economic force is accepted. Its
bank
accounts were spread across the globe, including in eastern Jerusalem,
and were registered in the names of various private individuals, [never
in the name of the PLO] including that of Ahmed Kari'a (Abu Alla). If
one
considers the sums received by the PLO in the form of taxes and
contributions,
and subtracts from this its various outlays -- on strengthening its
structure,
on propaganda and on operations, the differential is hugely on the side
of the earnings.

If Yasser Arafat ever sits down to write his economic memoirs,
he will
also be able to solve the question of the disappearance of Samir Najem
A-Din. This mysterious man, a Palestinian resident in Saudi Arabia, is
today in

the seventh decade of his life, if he is still alive. A-Din
has been
portrayed in the Western press as one of the leading PLO money men, as
the head of a secret arm concerned with the transfer of funds for
confidential
purposes. He led the "SAS" whose name came from the first initials of
the
names of its three managers: Samir Najem A-Din, Adnan Al-Kilani and
Sakir
Farhan. This triumvirate managed business interests straddling the
world,
via BCCI, the same institution at the center of scandal five years ago.
It was founded by a group of Sheikhs from the United Arab Emirates, and
was closed in 1992 in a joint operation of Interpol and the World Bank.
The western media reported then that the bank was a giant launderer of
illegal funds, including the funds of many underground and terror
organizations.
Its management sat in Pakistan, but the orders came out of Abu
Dhabi.

Legal officers managed to confiscate 20 billion dollars, 75%
of the
assets of the Bank in 69 states. The closure of the bank also led to
the
discovery of account number 80820577, in the name of Samir Najem A-Din,
from which money was taken for a variety of purposes. On 13th of March,
1984, for example, the owner of the account instructed the bank to
transfer
$17,000 to the Dafex arms factory in Portugal. Two weeks later he
ordered
the transfer of $100,000 to the account of Munzer Al-Kazar in Banco De
Bilbao in Spain. Al-Kazar is a Syrian citizen close to the regime in
Damascus,
whose name has been linked in recent years to a number of illegal
actions
taken on behalf of Palestinian terror organizations, among them the
bombing
of the Pan-Am plane over Lockerbie.

In an interview with the BBC after the liquidation of the
bank, Rasan
Ahmed Kassem, manager of the branch in Sloane Street in London, related
that A- Din opened the account with a deposit of $50 million, and that
most of that money was used for arms purchases in Britain. The true
role
of Najem a-Din is made yet more elusive by the claim that he was the
money
man for the Abu Nidal organization, which split off from the PLO
already
at the beginning of the 1970s, in which case he could not be connected
to the secret accounts of Arafat. A directive given by Najem A-din to
the
bank, in which he orders the monthly transfer of 10,000 pounds to the
account
of Amin al-Banna, apparently the cousin of Abu Nidal, is used as a
basis
for this claim. Al-Banna is suspected of involvement in the murder of
Issam
Sartawi, Arafat's political adviser.

According to various sources of information, the PLO
participated in
the establishment of the airline of the Maldive Islands, and afterwards
was one of the owners of the airline of Guinea-Bissau. An Israeli
official
says that Fayez Zaidan -- head of the Palestinian Aviation Authority
today
— managed this company in the past. Samed also acquired a duty-free
shop
at Tanzania's international airport in Dar e-Salaam. In 1986, the PLO
representative
in Zimbabwe, Ali Khalima, said that, "this is merely an investment,"
and
that in the same period, Samed also dealt in purchasing additional
shops
in Zimbabwe and Mozambique. Last week, a western diplomatic official --
who requested that his name not be mentioned -- said that various
Palestinian
Authority officials have confirmed the existence of airlines and
duty-free
shops in Africa which belong to the PLO. Even so, the same Palestinians
have claimed that many of these assets -- over the years -- suffered
heavy
losses for the PLO, with some of them in a state of bankruptcy.

The opposition to Arafat inside the PLO, and the various
factions which
quit the organization, such as that led by Abu Zaim (Attalah Attalah)
in
1986, have uncovered a long series of financial transfers benefitting
senior
PLO officials and secret bank accounts under the Rais' direct
supervision.
In his book, Inside the PLO, journalist David Halevy describes a
complex
network of such secret accounts, which were designed for financing
exceptional
actions and special operations. According to Halevy, the PLO treasury
disburses
approximately $150 million annually to the chairman's network of
private
accounts. He points out that Arafat had so much money that he was able
to lend money to countries such as [the former] North Yemen and Congo,
[the former] Lebanese President Amin Gemayel and others. Many
Palestinians
are sure that Arafat is not tainted by personal corruption, but nobody
is sure that the many funds under his control are being utilized for
goals
known to, and accepted by, a majority of the Palestinian people. The
policy
of the PLO and its leader have also directly influenced both his
economic
and his political situation. His support for Saddam Hussein after his
invasion
of Kuwait brought about a cessation in the Gulf states' support for the
PLO and the expulsion of hundreds of thousands of Palestinian workers.
The organization almost went bankrupt. It is known that part of Samed's
assets were sold during that period in order to finance the PLO's
regular
activity; it is not clear what part. Approximately one year ago, the
American
Congress' oversight committee held a secret investigation into the
subject
and even collected testimony from private and official Israeli experts.
The investigation's report was not published. Even so, it is known that
the examiners did not succeed in unequivocally determining the worth of
the PLO's overseas assets.

Khosam Hadad, a Palestinian Legislative Council member from
Nablus,
says: "One of the greatest disasters of our economy is that Arafat and
his friends are not transferring the PLO's overseas assets to the
ownership
of the [Palestinian] Authority, a step which could greatly aid economic
development here." After his expulsion from the territories in 1988,
for
Fatah activity, Hadad filled various posts at PLO headquarters in
Tunis.
"The PLO still has a great many assets in various countries," testifies
Hadad. "We have companies, we have real estate, and we have investments
in a range of areas. Over the years, the problem has been that the lack
of a framework to supervise these assets. Private elements have
exploited
this for their [own] needs. The [Palestinian] Authority -- instead of
becoming
a proper body -- is continuing Arafat's own way and lacks supervision
over
everything related to money."

Abu-Allah, the head of Samed and Chairman of the Palestinian
Parliament
was not happy to cooperate. "I know nothing about the income of the PLO
abroad," he said.

Q: Can we talk about Samed?

A: "I know nothing about Samed."

Q: But you are the organization's chairman?

A: "I know nothing about Samed. If you want to talk about the
peace
process which is going mad right in front of your eyes, please. Do you
want to talk about the Palestinian legislative branch -- no problem.
But
about the PLO abroad or Samed, I know nothing, really nothing. Thank
you
and goodbye."

(IsraelNN.com) Palestinian
Authority (PA) legislators are looking for 15,000 PA policemen whose
identities could not be confirmed on salary forms, according to Mideast
Newsline. The PA pays $350 million every month for police salaries.

The report follows complaints by American legislators and former
special military envoy Lt. Gen. William Ward that the PA has padded its
salary list with fictitious people. The Palestinian Legislative Council
searched for the 60,000 officers who receive salaries and discovered
that 15 percent of them do not exist or no longer work.